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22 February, 09:33

The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents $ 9,119 Accounts receivable 73,922 Merchandise inventories 63,862 Prepaid expenses 4,800 Accounts payable $ 15,650 Notes payable 90,138 Other current liabilities 10,200 If net sales for the current year were $608,000, the firm's days' sales uncollected for the year is: (Use 365 days a year.)

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  1. 22 February, 10:00
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    40 days.

    Explanation:

    In the absence of the information about opening receivables, the closing figure is assumed to be the average accounts receivables,

    Hence,

    Debtors Turnover Ratio for Reagan:

    = Sales : Average Accounts Receivables

    = $608,000 : $73,922

    = 8.22 times

    Assuming that the number of days in a year as 365,

    the firm's days sales uncollected for the year works out to:

    = 365 days : Debtors Turnover Ratio

    = 365 : 8.22

    = 40.40 or 40 days.
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